iSelect surveyed 1,100 Australian households over July, with 70% of them revealing they had cut back on household expenditure in order to afford their monthly mortgage repayments.
According to the survey results, dining out and holidays were the most common areas where people made sacrifices, though one in five households said they cut back on groceries in an effort to afford their mortgage repayments.
But while the majority of households are being forced into sacrifices so they can pay off their mortgage, the iSelect survey shows few took advantage of the May rate cut announced by the Reserve Bank of Australia (RBA).
“It seems many mortgage holders prefer to save by cutting back around the home rather than taking the time to see if switching to a different home loan product or provider could ease the pressure on the household budget,” iSelect spokesperson Laura Crowden said.
“While record high property prices continue to put home buyers under stress when it comes to mortgage repayments, many home owners often underestimate the savings that could be gained by switching to a new loan with a lower interest rate,” Crowden said.
According to the iSelect survey, just 11% of mortgage holders switched providers or rates following the May RBA rate cut.
In total, 65% of households took no action following the may rate reduction, with 30% of those households saying they believed it “would not be worth the effort.”
According to Crowder, a large number of Australian households are put off switching due to exit fees, despite the fact they could save hundreds of dollars each month by even a small change in their situation.
“For example, for a home owner with a $300,000 mortgage currently paying 4.69 per cent, moving to a lower interest rate of 3.69% could save up to $175 in interest every month,” she said.
“Home owners really should be taking advantage of these record low rates to reduce the length of their loan. If you switch to a lower interest rate or your current lender drops your rate, ask them to keep your repayments the same and you could quickly build up a handy buffer.”